They owned a penthouse apartment on the corner of East 64th Street and Lexington Avenue in Manhattan, and owned a beach house in Montauk. Bernie and Ruth co-owned two private jets with friends so they could trade off flying to these vacations spots. The six-figure membership fees allowed the Madoffs to make wealthy friends—you could call them potential investors—from all around the world.
Bernie paid them at least six-figure salaries and provided them Platinum American Express cards that drew from the pot of investor money. The eventual bankruptcy suit laid bare their credit card bills, demonstrating, for example, that the brothers charged thousands of dollars on a family ski vacation in Jackson Hole in January In fact, that final year of the deceit, , brought lots of major expenditures.
Bear Stearns and Lehman Brothers had already melted down by that point. In many ways, the Madoff family represented the quintessential American dream. Bernie and Ruth were both the grandchildren of Eastern European Jewish immigrants who settled on the Lower East Side; both of their parents suffered in the Great Depression.
Even as he lied to them, Bernie was physically affectionate with his sons, who sat near his desk on the 19th floor of Madoff Securities. Experts have compared Madoff to a mob captain. He only trusted family, though often not enough to actually tell them everything. In , Shana even married Eric Swanson, then the assistant director of the office of compliance inspections and examinations at the SEC.
Bernie promised and delivered 12 to 20 percent returns for his clients, no matter how the market was moving. In the final days and hours before his arrest, Ruth started making withdrawals. Like her sons, Ruth has never admitted any involvement with the scheme.
Was it pilfering from the plumbers union, Local , in Syracuse? Bankrupting a veteran of the war in Afghanistan? Answering a single question, Madoff exhibits several all-too-familiar cognitive biases, psychological tendencies that can lead to irrational behavior.
Soltes reminds students that Madoff was once best known for pioneering the controversial but legal practice of payment for order flow, in which he would pay brokerage firms a couple of cents per share to send orders through his firm. This made him popular among investors, who previously had to pay brokers for the service of buying shares; now Madoff had turned the practice upside down and was paying them to trade. Outside his brokerage business though, in his growing investment management practice, Madoff started to feel greater strain in generating profits.
Another controversial but legal practice, this involved short-selling a stock without first borrowing the security, and then acquiring the security after the sale. But then he started conducting short sales without putting them on the books, which is illegal. A few steps down the slippery slope later, he was running a Ponzi scheme. I kept on waiting for the environment to change and of course it never did…. His other son died of a recurrence of cancer, which he blamed on the stress caused by his father.
I spent hours talking to Madoff during his years behind bars , and more hours listening to tape of his depositions from prison, exclusive material which offered insight into his crimes for my podcast.
To the extent one can get into the mind of the greatest con artist of the age, I felt I knew him, or at least certain things about him. And I came to believe that Bernie Madoff was, in his way, a truth-teller. Madoff understood the workings of the financial system as few others did. Clearly he used that knowledge to sustain his con. When he was caught in , as the financial crisis gripped America ever tighter, Madoff became a poster child for the misdeeds of that entire universe.
The banks had pushed us to the brink of national ruin. But theirs was a complicated fraud, including such arcana as securitized bonds and overleverage. Madoff, on the other hand, looked you in the eye, shook your hand, and then cut the shirt off your back.
That was straightforward. And so a narrative evolved. The systems, financial and to some extent judicial, cast Madoff as a rogue operator, a lone bad apple in an otherwise forthright arrangement. We were all hoodwinked, was the going line. He was that good. The financial system enabled, weaponized, and profited handsomely from Madoff.
Some hedge funds he did business with were nothing more than sales operations. They lured in clients with promises of due diligence and exclusive access. It was true.
And for doing what? Account icon An icon in the shape of a person's head and shoulders. It often indicates a user profile. Log out. US Markets Loading H M S In the news. Stephanie Yang and Grace Kay. On Wednesday, Bernie Madoff died of natural causes in federal prison, according to the Associated Press.
In , he was sentenced to years in prison for running the largest Ponzi scheme in history. Get a daily selection of our top stories based on your reading preferences. Loading Something is loading. Email address. Sign up for notifications from Insider!
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